1 in 4 Aussies fear credit score will affect loan approval

Twenty-five per cent of Aussies fear their credit score could prevent them from getting a loan or credit card, according to a new survey by finder.com.au.

Of the 2,033 respondents who took part in the national survey, the majority (67 per cent) said they would not expect a lender to reject an application based on their credit score.

Around one in four said they thought their loan or credit card application could be rejected due to their credit score.

The remainder (8 per cent) had ‘no opinion’ on what consequences their credit score might have on their ability to borrow.

South Australians were the most fearful of loan rejection due to a bad credit score (with 30 per cent worried about it), ahead of West Australians (29 per cent) and 25 per cent of those in both New South Wales and Victoria.

Younger adults were also the most concerned about the impact of their credit score, with 40 per cent of Generation Y saying they were worried about their credit score impacting their ability to borrow, compared with Generation X (31 per cent) and just 11 per cent of Baby Boomers.

The survey also found that 9 per cent of respondents had previously experienced negative fallout from their credit rating.

“There are still many of us in dark when it comes to credit scores,” Ms Hassan said.

“People often don’t realise the consequences of a poor credit history until they get knocked back applying for credit. A shaky history of paying bills on time and outstanding debt directly impacts your credit score.

“It can really be a nightmare if you put it all on the line to buy your first home and bad money habits from the past come back to haunt you.”

Ms Hassan said in such a scenario, the only lenders who may be willing to take you on will be those that deal with high-risk borrowers in return for high interest.

Finder.com.au has partnered with credit bureau Veda to offer users a free credit score check, along with tips on how they can improve their credit score.

“Knowing your credit score allows you to apply for credit with confidence. You may be pleasantly surprised with your score. At the very least, it can save you from unexpected rejection and be the catalyst for positive change,” Ms Hassan said.

“The first step Aussies could make is to pay bills on time and lower unused credit card limits.

“There’s no quick fix. Credit scores take into account years of past behaviour, but there’s no time like the present to change your habits.”